JHC October 20

October 2020 • Vol.16 • No.5

The Process of Change The U.S. healthcare supply chain has undergone a tremendous amount of change within a short window of time.

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CONTENTS »» OCTOBER 2020 The Journal of Healthcare Contracting is published bi-monthly

by Share Moving Media 1735 N. Brown Rd. Ste. 140 Lawrenceville, GA 30043-8153 Phone: 770/263-5262 FAX: 770/236-8023 e-mail: info@jhconline.com www.jhconline.com

The Process of Change

Editorial Staff Editor Graham Garrison ggarrison@sharemovingmedia.com

The U.S. healthcare supply chain has undergone a tremendous amount of change within a short window of time. » pg22

Art Director Brent Cashman bcashman@sharemovingmedia.com Publisher John Pritchard jpritchard@sharemovingmedia.com Vice President of Sales Katie Educate keducate@sharemovingmedia.com Circulation Laura Gantert lgantert@sharemovingmedia.com

The Journal of Healthcare Contracting (ISSN 1548-4165) is published monthly by Share Moving Media, 1735 N. Brown Rd. Ste. 140, Lawrenceville, GA 30043-8153. Copyright

2 Publisher’s Letter: Three things that are forever changed 4 What Can Drones Do For You?

Drone technology and the healthcare supply chain

8 Innovation Through Supply Chain Optimization

2020 by Share Moving Media. All rights

Moving strategies forward in an age of disruption

reserved. Subscriptions: $48 per year. If

14 Acurity, Nexera integrated into Premier

you would like to subscribe or notify us of address changes, please contact us at the above numbers or address.

POSTMASTER: Send address changes to Share Moving Media, 1735 N. Brown Rd. Ste. 140, Lawrenceville, GA 30043-8153. Please note: The acceptance of advertising or products mentioned by contributing authors does not constitute endorsement by the publisher.

Publisher cannot accept responsibility for the correctness of an opinion expressed by contributing authors.

16 Don’t Delay

As if combating a pandemic was not enough, healthcare providers were urging patients not to delay important medical procedures.

26 The Role of Demand Forecasting in the Resilient Supply Chain

The industry must use this moment to invest in automation and digitization of the supply chain to improve efficiency, visibility and response.

30 Making the Most of the ERTC

The ERTC provisions of the CARES Act provide significant economics for employers who are ineligible or unable to participate in the PPP.

The Journal of Healthcare Contracting | October 2020

33 Industry Prepared for COVID-19 Vaccine Alarms were raised this spring and summer about potential shortages of vaccine-related products. Despite the uncertainty, industry experts expressed confidence the country would avoid situations such as the PPE shortages experienced earlier in the year.

38 Stockpiles Divert Critical Supplies from the Front Lines to the Back Shelf Long-term stockpiles present an unworkable mix of management, logistical, and financial challenges for healthcare providers

40 Healthcare Group Purchasing Organizations: Helping to drive COVID-19 response and recovery 42 Conductiv Introduces Diversity Initiative 47 Calendar 48 Making Sense of the Changes

1

PUBLISHER’S LETTER

John Pritchard

Three things that are forever changed Systems perform exactly as they were designed, as the saying goes. We have gotten a reminder of that the last 6-7 months. The Just-in-Time supply and distribution systems we have put in place showed us just how true that statement is.

I hear people muttering that we have short memories and will be vulnerable again soon enough, but I’m not so sure. In fact, here are three things I believe have changed for good.

1. Visibility will part of the sourcing relationship.

Supply chain leaders will require more information about a supplier’s ability to supply from now on. New metrics will emerge as to what a supplier has in raw materials, work in progress, finished goods and product in transit. This will give them the ability to sound the alarm that a possible disruption may be looming. No longer will this alarm be sounded when a back order is noticed on the dock.

2. Resiliency is a new imperative for supply chain departments.

Bruce Johnson does a great job on page 26 detailing how Demand Forecasting can greatly help make a more resilient supply chain for IDNs. Other parts of the supply chain, such as vetting and approving new vendors, must also be more resilient. The luxury of only doing business with organizations we know may no longer be a luxury we enjoy.

3. We will see new links in the supply chain.

For now, I will call them surge capacity suppliers. I think we all learned that the national stockpile as it was designed was not the answer. Maybe it will be distributors having more product or IDNs adding warehouses for more inventory. Or, it may be a new player we have yet to see. Dr. Eugene Schneller from Arizona State University uses the parable of a fire house for this new stakeholder. We don’t build fire houses so we have fires, we build them in case we have a fire. The real challenge is, how do we finance this new “fire house”?

I’d love to hear your thoughts of changes you see happening as we exit this COVID-19 era into what the new normal is. Thanks for reading this issue of The Journal of Healthcare Contracting.

2

October 2020 | The Journal of Healthcare Contracting

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EXECUTIVE INTERVIEW

What Can Drones Do For You? Drone technology and the healthcare supply chain

The healthcare supply chain moves with a sense of urgency. Unfortunately,

can carry medical payloads weighing up

sometimes shipments are at the mercy of ground transportation delays.

to 4.4 pounds over distances of up to

But what if there was a way to make critical deliveries without the worries of traffic jams or a shortage of vehicles? What if hospitals and health systems could ship and re-

12 miles.

Throughout the drone delivery

ceive lab samples at a quicker pace, thus receiving faster results? What if sensitive cancer

program, a medical professional will

treatment supplies could be delivered without the worry of delay?

pack and secure a drone payload container with a medical sample or specimen – such as a blood sample – at one

The technology already exists. Supply

at WakeMed’s flagship hospital and cam-

of WakeMed’s nearby facilities. The

pus in the Raleigh, N.C., metropolitan

medical professional hands the payload

area, with oversight by the Federal Avia-

container to a UPS Flight Forward

groundbreaking new logistics service to

tion Administration and North Carolina

operator who weighs the box and car-

deliver medical samples via unmanned

Department of Transportation.

ries it to a specially designated takeoff

chain leaders need only look to the sky.

In March of 2019, UPS announced a

drones through a collaboration with

The program will utilize Matternet’s

and landing location outside the facility.

Matternet, a leader in autonomous drone

M2 quadcopter, which is powered by

The drone will autonomously fly along

technology. The program is taking place

a rechargeable lithium-ion battery, and

a predetermined flight path, monitored by a specially trained Remote Pilot-inCommand (RPIC), to a fixed landing pad at WakeMed’s main hospital and central pathology lab. This will be an ongoing program at WakeMed, and UPS and Matternet will use the learnings to consider how drones can be applied to improve transport services at other hospitals and medical facilities across the U.S. The Journal of Healthcare Contracting asked Kevin Wasik, head of business development, UPS Flight Forward, for insights into drone technology, its uses, and how it is entering the healthcare field.

The Journal of Healthcare Contracting: How did UPS get started in drone delivery? Why the decision to explore this technology?

4

October 2020 | The Journal of Healthcare Contracting

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INTERVENTIONAL CARE

PATIENT CARE

ENVIRONMENT OF CARE

EXECUTIVE INTERVIEW

Kevin Wasik: UPS has been testing and

My focus is on solving problems for

– WakeMed has yet to call on a ground

investing in drone delivery since 2016.

the healthcare community with present

We see tremendous potential for UAS to

day capabilities. It’s very common for

disrupt the same-day delivery industry. To

hospital networks to physically connect

JHC: Why is this needed in health-

start, we are focused on urgent medical

a web of decentralized facilities with

care today?

deliveries, where faster and more reliable

same-day ground couriers. Couriers run

Wasik: Physical access to healthcare is

transport of healthcare items can improve

daily bus routes to pick up and drop

a real problem within the United States.

patient care.

off from the same locations, multiple

“Rural America” makes up at least 15 to

times per day.

20% of the U.S. population. This popula-

Speed

ʯ Overcome ground traffic and chronic parking issues

ʯ Access hard-to-reach locations ʯ Improved turnaround time for urgent lab samples Efficiency

ʯ Improve economics of final mile delivery

ʯ Optimize workflow with smaller, more frequent deliveries

ʯ Battery powered aircraft are

Ground vehicles are regularly ham-

tion faces inequities that result in worse

pered by ground traffic and limited by

healthcare than that of urban and subur-

total number of vehicles.

ban residents. Drone delivery represents a

Drones are different. They are available on-demand – virtually anywhere –

unique opportunity to physically connect rural America to healthcare providers.

and can be used to increase the speed of delivery. This is really important within

JHC: What are other upcoming initia-

the healthcare industry. For example,

tives related to the program?

ensuring urgent lab samples are tested

Wasik: UPS Flight Forward seeks to opti-

sooner or personalized cancer treatments

mize how we operate. We are focused on

that are time- and temperature-sensitive

delivering high-impact enhancements that

are rapidly delivered to the patient’s point

will allow more complex operations. For

of care.

example, longer distance flights, heavier

energy efficient and better for the environment

courier for a STAT delivery.

payloads, and increasing the capacity of JHC: Please tell us about your work

total deliveries per hour.

with WakeMed Hospital in Raleigh.

Accuracy

ʯ Greater predictability for time- and temperature-sensitive payloads

ʯ Preprogrammed flight for precision

JHC: Can you talk about UPS’s

UPS Flight Forward?

COVID-19 response? How has it

Wasik: UPS Flight Forward operates

affected business operations? What

Monday through Friday, eight hours per

are some unique ways in which UPS

takeoff and landings within

day. Prior to the drone program, lab spec-

has responded?

tight footprints

imens were transported from WakeMed’s

Wasik: UPS Flight Forward teamed up

outpatient clinic to the hospital’s central

with the nation’s largest pharmacy to

lab via a ground courier. The courier

deliver prescriptions on-demand from a

ʯ Flight status alerts and progress delivery maps

6

What is UPS able to provide through

would make eight scheduled trips per day

pharmacy in Florida, to a nearby retire-

JHC: What is your personal interest

and occasionally return for an unplanned

ment community called The Villages,

in drone technology?

STAT delivery.

home to the largest retirement community

Wasik: Drone technology has been

Today, WakeMed hospital is using a

around for decades. Now, the FAA is

drone to increase the frequency and speed

helps a high-risk demographic remain

leading a pilot program designed to inte-

of specimen transport. The lab is receiv-

healthy at home. Instead of visiting the

grate UAS into National Air Space. UPS

ing more specimens in smaller batches

pharmacy, patients have the option to

Flight Forward is a fully certified drone

throughout the day – increasing the ef-

receive their prescription in as little as 30

airline working with the FAA to test and

ficiency of lab. Doctors have an oppor-

minutes. UPSFF is proud to run a drone

develop the right solutions to scale drone

tunity to diagnose patients sooner. And,

operation that supports social distancing

delivery services.

since the program started in March, 2019

to prevent the spread of COVID-19.

in the United States. This drone operation

October 2020 | The Journal of Healthcare Contracting

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LEADERSHIP

Innovation Through Supply Chain Optimization Moving strategies forward in an age of disruption

Innovation is typically viewed as the application of a better solution that meets new requirements or market needs. Upon further review, the definition of innovation is also an incremental improvement of an existing thing or an improved way of doing things.

Supply chain management is a myriad of management practices, with multiple areas for incremental improvement/innovation. Optimization of supply chain management practices can occur in acquisition cost and

BY DEE DONATELLI

8

standardization activities, as well as in improving utilization via process improvement, standardizing clinical practice, and waste avoidance.

October 2020 | The Journal of Healthcare Contracting

Improved supply chain management

value-based purchasing and important

but is merely the first step in success-

skills, and supply chain optimization strat-

for consideration over the next five years.

fully achieving sustainable savings and

egy and activities are needed today more

However, price transparency, without

“success,” as defined by maintained or

than ever before. In a SYFT sponsored

accompanying evidence regarding quality,

improved patient outcomes.

survey reported in 2020, 97% of hospital

could lead to decisions detrimental to

leaders agreed optimization could reduce

both providers of care and patients.

Supply chain optimization means understanding your current state, focusing

costs. Methods to reduce costs include proactively identifying cost savings opportunities by tracking inventory more efficiently, tracking and comparing costper-case outcomes, identify and report surgical supply use variance, and discussing variance with surgeons.

In the same survey, 75% of respondents agreed the same optimization efforts would improve quality of care

Supply chain optimization means understanding your current state, focusing upon specific areas of improvement, and then getting the job done. Statistics show that most innovations fail as a result of the lack of implementation and follow through.

through time savings and efficiency improvements, cost savings, happier phyManaging spend and achieving value in

upon specific areas of improvement, and

supplies, and improved recall manage-

supply chain decision making requires data

then getting the job done. Statistics show

ment (SYFT, 2020).

sets to address all purchasing decisions.

that most innovations fail as a result of

Creating a comprehensive analytics plat-

the lack of implementation and follow

form that begins with the request to buy

through. Innovation is not just about

Value-based purchasing

and supports and analyzes both proactively

coming up with some fancy new way

Value-based purchasing is a driver for

and retrospectively all sourcing activity is

to do things but rather a consistent and

optimizing supply chain practices. Value-

fundamental in value management and

incremental improvement strategy on the

based purchasing is the process that con-

allows progression to clinical equivalency

things we do every day.

siders (1) safe and effective products, (2)

and a focus on outcomes. When coupled

products judged as superior and covered

with clinical evidence we have robust data

several months is that is we do not lack

by payments (3) products accepted and

sets to support decision making for all

the ability, but we do often lack agility in

prescribed by physicians and, (4) products

types of decisions, whether the focus is de-

getting things done. I have seen organiza-

preferred and utilized by consumers.

sicians and staff, a reduction in expired

What I have recognized over the past

mand, cost, standardization, or outcomes.

tions move strategies forward in a matter

In a 2018 CAPS RESEARCH study,

Supply chain optimization has sev-

of weeks that would have taken years pre-

88% of the respondents said “improving

eral critical success factors. The ability

Covid. What have you been focused upon

data transparency across the supply chain”

to understand current state (spend) is

in regard to optimizing your supply chain

was a defining factor associated with

imperative in standardization efforts,

innovative abilities?

Dee Donatelli, R.N., CMRP, CVAHP, has more than 40 years of experience in the healthcare industry as a registered nurse, supply chain executive and consultant. Donatelli has held leadership positions in hospitals, consulting firms, distributors and GPOs. Donatelli is a past president of the Association of Healthcare Value Analysis Professionals (AHVAP) and is the current Chair of the Association for Healthcare Resource and Materials Management (AHRMM). An Bellwether Class of 2015 inductee, she also serves on Bellwether League’s Board of Directors. Donatelli currently serves as VP of Professional Services at TractManager and as Principal, Dee Donatelli Consulting, LLC. She can be reached at Dee@DeeDonatelli.com.

The Journal of Healthcare Contracting | October 2020

9

SPONSORED

OWENS & MINOR

Eliminating Inefficiencies in Implant Purchases The old way of processing implant purchases and preference items is draining supply chain teams of their most precious commodity – time.

Implant purchases and preference items cause a lot of headaches for

“For a lot of hospitals, the purchas-

hospital and health system supply chain teams. They also generate a tremendous

ing of bill only products can be a time

amount of paperwork.

consuming and laborious process,” said Angela McNally, Vice President, Provider Solutions for Owens & Minor. “These

In an age of digital, streamlined

10

hospital must receive the form, then manu-

products typically are not captured by a

solutions, the process for implant pur-

ally research to see if that exact product

standard MMIS, and because of that, most

chases and physician preference items has

was used in a case, and then manually

providers rely on paper forms and manual

maintained a reliance on paper forms and

verify if the right price with the right dis-

interventions to get them approved and

manual processes to get things done.

count was applied to it. That same person

purchased,” McNally continued.

It starts with a vendor rep typically

has to then go into the materials manage-

filling out a paper form for a requisition of

ment information systems (MMIS) system

being introduced to the market designed

a product that is a bill-only product (such

and request a purchase order (PO) for that

to simplify a tedious process by eliminat-

as an orthopedic implant). Someone at the

product, which is then sent to the vendor.

ing manual work and manual processes.

Fortunately, there are new solutions

October 2020 | The Journal of Healthcare Contracting

Streamline the Bill-Only Process One of those solutions is Owens & Minor’s Bill Only Management solution. “We developed Bill Only Management with the express purpose of making the purchase cycle for bill only products easier for both the hospital and the vendor,” McNally said. “We wanted the solution to simplify the process so that that the purchase cycle could be counted in days or even hours

“ We wanted to design a solution that addressed the unique challenges of purchasing bill only products, one that eliminates paper forms, provides visibility to the process and uses advance technology to automate manual tasks.

With Bill Only Management we have.”

- Angela McNally, Vice President, Provider Solutions for Owens & Minor.

instead of weeks and months.”

Owens & Minor’s Bill Only Manage-

information is collected/captured online

where a PO or other document is at

ment is a fully automated, cloud-based

via Bill Only Management.

any one time, Bill Only Management

solution for bill-only products that

provides that visibility. Bill Only Man-

streamlines the process, eliminates inef-

Reducing the potential for errors.

agement provides insights via reports

ficiencies, saves time, and puts up some

There are fewer errors on the person

for better decision making that you

“guardrails” to ensure the right pricing is

receiving the information because of bad

wouldn’t get via a manual process.

applied to the products. It does this by:

handwriting, etc.

Shortening time-consuming tasks.

“Digitizing” the information. Instead

Allowing transparency/visibility

Because the contracts are loaded into Bill

of forms that are manually filled out, the

into the process. If you want to know

Only Management, it cuts down on the

Pain Points How painful and time-consuming can implant purchases and preference items be for a hospital or health system? Consider:

ʯ Many of these preference items are walked in by the vendor

ʯ Manual validation of contract pricing must occur.

ʯ The manual approval process for implants requires routing the form to the right person for approval (wet signature).

is the PO/requisition on), and a duplication of efforts (i.e. the clinical staff and buyer working to get same information and proper approvals).

ʯ It’s inefficient (too much time

the day of the procedure, so

ʯ A PO must be created from that

spent on these manual tasks and

they are not captured in the

requisition. Often this too is a

approval process highly depen-

standard MMIS and must be

manual form and must be typed

dent on availability of approvers)

manually manage.

in to the MMIS system for

ʯ The vendor rep manually submits a requisition for the implant and submits it to the hospital.

PO creation.

ʯ There is a lack of visibility in the process (i.e. whose “desk”

The Journal of Healthcare Contracting | October 2020

ʯ Finance departments may undertake manual processes to apply complex discounts, pricing tiers and capitation agreements.

11

SPONSORED

OWENS & MINOR

time verifying prices and helps ensure the

Bill Only Management enables hospital

takes the pain out of many critical

provider is paying the correct negotiated

to simplify the entire purchase cycle for

supply chain functions for hospitals and

price every time. Also, automatic work-

bill only products, from the time when a

health systems. The days of looking

flows are used to route the right document

vendor tills out a requisition to the time a

up prices to ensure the vendor put in

to the right person for approval instead of

PO is issued. “What the solution ultimately

the right price are gone. With Bill Only

sticking it inter office mail or sending as an

does is make life easier for people

Management, supply chain teams have

attachment. This speeds up the process.

involved in purchasing implants and gives

a cloud-based solution that automates

them back time to do other, more strategic

the entire purchase cycle for bill only

Simplified training. Owens & Minor will

tasks instead of doing things like manually

and physician preference products,

manage the training and implementation

verifying a price� stated McNally.

transforming a tedious and time-

of the software, which in return saves the supply chain team time and money.

Indeed, from its quick implementation to full utilization, Bill Only Management

consuming process into a streamlined and simplified one.

Benefits of the Bill Only Management Solution

CONTRACT PRICE MANAGEMENT:

LABOR OPTIMIZATION: Provides the

ENHANCED REPORTING: Enables

Ensures you pay the correct negotiated

option to shift initial case documenta-

you to create and share custom export

price every time

tion to the vendor representative with-

reports by procedure, physician, contract,

out any loss of input or pricing control

product, price, or any number of metrics

Leverages an automated system for

STREAMLINED APPROVAL PROCESS:

QUICK ACCESS TO KEY DATA: Pro-

identifying capitation opportunities

Centralizes bill-only purchase approvals

vides easily accessible data regarding

and modifying requisitions to reflect

to 1-2 people across a single hospital

procedure, vendor, and utilization that

correct pricing

or network by automating requisitions,

can be used to manage overall busi-

purchase orders, and invoice receipts

ness or prepare for audits and recalls

CAPITATION MANAGEMENT:

12

October 2020 | The Journal of Healthcare Contracting

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RPC PROFILE

Acurity, Nexera integrated into Premier Premier’s acquisition in February of regional GPO Acurity will lead to some contract shuffling in the New York tri-state area.

order to bring value to providers with unique needs and requirements.

Acurity, a former subsidiary of the Greater New York Hospital Association,

ʯ Acurity’s local contracts for the

has served members in New York, New Jersey and Connecticut for more than 40

tri-state area – e.g., those with

years, and has been a Premier customer and strategic partner for 24 of those years.

diverse suppliers, local trades and

With more than 300 hospital members and 2,700 health-related facilities, Acurity in

in areas where local licensure is a

FY2019 accounted for approximately $68 million – or 10% – of Premier’s total net

factor – will remain in place to the

administrative fees.

extent that member interest and participation remain.

In addition, Hargraves said the acquisition: 1) secures five-year terms for group purchasing contracts at economics similar to historic rates, without termination-for-convenience clauses for the majority of acquired contracts; and 2) reduces functional overlap between Premier and Acurity, particularly in the supply chain contracting and member analytics and reporting areas, and by further eliminating duplicative GPO costs.

In addition to Acurity, Premier in February also purchased GNHYA subsidiary Nexera, which manages and co-manages

Premier’s acquisition of Acurity takes GNYHA out of the group

elements of Acurity’s mission and success

supply chain operations for a number of

within Premier.”

Acurity clients. Premier expects to scale

purchasing business.

Premier acquired all of Acurity’s mem-

its members, generated over a 40+-year

ber participation contracts. In addition,

“Nexera brings compelling and

history as a GPO, is an important reason

Hargraves told The Journal of Healthcare

complementary offerings to Premier’s

why Premier acquired Acurity,” said

Contracting that:

portfolio,” said Hargraves. “We expect to

the New York tri-state area.

ʯ Where Acurity and Premier contracts

further scale and expand its business out-

Chain David Hargraves. “Remaining

overlap, the Acurity contracts will

side of the New York market to provide

relevant, maintaining high participation

merge with existing Premier contracts

technology-enabled value analytics capa-

at the end of their Acurity terms.

bilities, supply chain business intelligence,

Premier Senior Vice President of Supply

while identifying savings opportunities, and contracting in new technologies and gap areas will continue to be important

14

and expand Nexera’s business outside of

“The loyalty between Acurity and

ʯ When possible, Acurity will continue to enhance Premier contracts in

and consolidated or virtual buying functions to a broader array of members.”

October 2020 | The Journal of Healthcare Contracting

REBUILDING TOGETHER On the journey of health care delivery, the pandemic presents an unexpected detour. Henry Schein Medical is committed to provide you with the resources you need to rebuild your practice.

To learn more, visit HenrySchein.com/RebuildTogether

TRENDS

Don’t Delay As if combating a pandemic was not enough, healthcare providers were urging patients not to delay important medical procedures.

In early spring, as COVID cases rose and states shut down, many hospitals, if

perhaps a gallbladder removed – things

not all in Georgia, stopped doing elective procedures, said Anna Adams, vice president

that are truly causing discomfort.”

of government relations at the Georgia Hospital Association (GHA).

For almost two months, those patients had to play the waiting game until hospitals were able to start their procedures

Or, at least, that’s the term used for

16

know that elective is really the best way

back up with new rules in place.

the procedures. Patients who had those

to describe these types of procedures,

procedures scheduled would probably

because it doesn’t really feel that way for

pitals started to open back up and allow

phrase it differently, she said. “I don’t

patients who needed hernia repairs, or

these elective procedures again, there was

“For some patients, as soon as hos-

October 2020 | The Journal of Healthcare Contracting

a flooding, if you will, of everyone trying to reschedule all at once.”

The purpose of the campaign is to

their healthcare disrupted due to CO-

encourage organizations, businesses,

VID-19. “While people should continue

and individuals to post on social media

to practice good hygiene, social distanc-

Georgia were still working feverishly to

pictures or videos of themselves wearing

ing and mask wearing in public settings,

get those done. Fortunately, most of

masks and to accompany these posts with

it is critically important for people to

those procedures were outpatient, so they

#MaskUpGA and a message about why

continue talking to their healthcare

weren’t contributing to the capacity issue

they “mask up.”

professionals to get the care they need,”

As of midsummer, hospitals in

the hospitals faced in July and August as COVID cases began to rise again.

“If the public doesn’t take personal

the organizations said in a joint release.

responsibility for their own health and

Delaying care for a medical emergency,

responsibility for not spreading CO-

such as a heart attack or stroke, can be

pandemic has thrown a wrench into the

VID, our hospitals are not going to get a

life-threatening or lead to serious com-

regular pace of electives. Not all patients

break,” Adams said.

plications. In children, delaying routine

However, there’s no doubt that the

who needed care rushed back to schedule their procedures.

“I think for certain communities, these patients would love to have their procedures done, but either couldn’t because the hospital stopped elective procedures, or they were choosing not to because they were afraid that going into the hospital would put them at risk for COVID.” GHA has done a lot of work, both statewide and at the community level, to ensure the public understands that

Recent research published by GoodRx reported that more than 75% of Americans have had some aspect of their healthcare disrupted due to COVID-19. “While people should continue to practice good hygiene, social distancing and mask wearing in public settings, it is critically important for people to continue talking to their healthcare professionals to get the care they need,” the organizations said in a joint release.

hospitals are safe and that the facilities are going through very extensive cleaning and sanitation measures to ensure patient safety.

At the national level, in July, an

care, such as vaccinations or well-child

alliance of healthcare organizations an-

visits that help to assess development and growth, can have negative consequences.

“Sanitation is not a new practice for

nounced the launch of a campaign and

hospitals,” said Adams. “Cleanliness is a

PSA called “Stop Medical Distancing.”

priority. But we don’t want our patients to

Committed to helping Americans better

people are avoiding medical visits in fear

delay care because of the fear of COVID.

understand the risks of not seeking medi-

of contracting COVID-19,” said William

It’s best for patients to get care as quickly

cal attention for symptoms that would

Shrank, M.D. and chief medical officer of

as possible so that these issues don’t get

normally lead to visiting a healthcare pro-

Humana. “While we understand the fears

worse or become chronic. We certainly

vider or healthcare facility, the campaign

that many people have around contracting

don’t want people to delay if they don’t

draws a distinction between social dis-

the virus, our country’s medical facilities

have to.”

tancing and medical distancing and under-

have adopted CDC guidelines and best

scores the preventive measures healthcare

practices and even telemedicine options

UpGA, a campaign to encourage all

organizations now have in place to limit

to make your visit as safe as possible

Georgians to make the choice to wear

the spread of the virus, including the use

to prevent the spread of the virus. The

face coverings when in public settings

of telemedicine.

intent of the campaign is to let people

In late July, GHA announced #Mask-

and to social distance when possible to

Recent research published by

“We are seeing a troubling pattern that

know that protecting yourself against get-

slow or stop the spread of COVID-19 in

GoodRx reported that more than 75%

ting this virus does not need to come at

the state.

of Americans have had some aspect of

the expense of your overall health.”

The Journal of Healthcare Contracting | October 2020

17

TRENDS

The healthcare organizations that

Adams said when some hospitals

came together to create the “Stop

started canceling elective procedures, they

Medical Distancing” campaign include:

also found themselves furloughing staff.

Baptist Health South Florida, Bay-

“In the middle of a pandemic, you

(CDC) study, patients delayed emergency care at an alarming rate.

As the United States declared a national emergency in response to the

lor Scott & White Health, Children's

don’t want to think about having to fur-

coronavirus disease 2019 (COVID-19)

Hospital of Philadelphia, Health Mart,

lough your staff so that you can meet

pandemic and states enacted stay-at-

Humana, Kindred Healthcare, LabCorp,

payroll,” she said. “This is something

home orders to slow the spread and

McKesson Corporation, Providence

that’s more common in smaller hospi-

reduce the burden on the U.S. health

and Walgreens. Together, this group of

tals and more rural areas, but it’s had a

care system, the CDC and the Centers

industry-leading healthcare experts is

huge impact on the big system facilities

for Medicare & Medicaid Services (CMS)

committed to collaborating on this im-

as well.”

recommended that health care systems

portant initiative to ensure the well-being of millions of Americans.

Indeed, in May, Georgia’s largest healthcare system, Emory Healthcare,

prioritize urgent visits and delay elective care to mitigate the spread of COVID-19 in health care settings.

By May 2020, national syndromic surveillance data found that emergency department (ED) visits had declined 42% during the early months of the pandemic. In the 10 weeks following the emergency declaration (March 15– May 23, 2020), ED visits declined 23% for myocardial infarction (MI), 20% for stroke, and 10% for hyperglycemic crisis, compared with the preceding 10week period (Jan. 5–March 14, 2020).

“EDs play a critical role in diagnosing and treating life-threatening conditions that might result in serious disability or death. Persons experiencing signs or symptoms of serious illness,

Financial impact

announced it would cut hours and

such as severe chest pain, sudden or

Having to delay care hasn’t affected just

furlough 1,500 employees as it faced

partial loss of motor function, altered

patient health. Hospitals in Georgia

a $660 million revenue shortfall due

mental state, signs of extreme hypergly-

and across the country are feeling the

to the COVID-19 pandemic, the Atlanta

cemia, or other life-threatening issues,

strain financially.

Business Chronicle reported. Another major

should seek immediate emergency care,

organization, Wellstar Health System,

regardless of the pandemic,” the CDC

financially, because these are the types of

announced in May it would furlough

said in a release. “Clear, frequent,

procedures where we do get some sort of

more than 1,000 employees.

highly visible communication from

“It has put them in a bad spot

18

revenue to help offset the losses that we

public health and health care profes-

see in other areas – emergency care and

sionals is needed to reinforce the

OB care, etc. When that revenue stream

Emergency care

importance of timely care for medical

is lost, it impacts the hospital’s ability to

Delayed medical care wasn’t solely related

emergencies and to assure the public

maintain normal operations, and it im-

to elective procedures. According to a Cen-

that EDs are implementing infection

pacts their cash flow,” Adams said.

ters for Disease Control and Prevention

prevention and control guidelines that

October 2020 | The Journal of Healthcare Contracting

Delivering for you, so you can deliver a difference.

Patient care may look different now, but the impact you make is the same.

No matter how you’re taking care of those in need, we’re here to support you.

We deliver the products and tools you need, however you need them, so you can deliver a difference.

Learn how we can support you at mms.mckesson.com/covid-19

©2020 McKesson Medical-Surgical Inc.

TRENDS

help ensure the safety of their patients

Making adjustments

pandemic. Georgia and other states are

and health care personnel.”

Adams said hospitals in Georgia have

no strangers to disaster preparedness, but

adjusted in several ways. Hospitals are

the majority of the disaster preparedness

study, at least one in five expected U.S.

performing extensive pre-surgical screen-

done in the past has been for things like

ED visits for MI or stroke and one in

ings that include asking patients a series

hurricanes and tornadoes.

10 ED visits for hyperglycemic crisis did

of question to determine if they’ve had

not occur during the initial months of

a fever or been around someone who

it’s not isolated to just one portion of the

the COVID-19 pandemic. Patients might

has tested positive for COVID. Many hos-

state,” Adams said. “COVID has had a

have delayed or avoided seeking care be-

pitals require pre-surgery COVID testing

profound effect on whole state and the

cause of fear of COVID-19, unintended

within a certain time period before the

entire United States of America.”

consequences of recommendations to

surgery occurs.

The CDC reported that, based off its

“This has been a new animal because

One positive change has been

“I think the screenings have given

the amount of communication that’s

patients a little peace of mind as well

happening from hospital to hospital.

L. Estes, chair of the American Hospital

as the providers and the facility itself,”

Recently, hospitals have started sharing

Association board, and president and

Adams said.

supplies because it’s still difficult to

stay at home, or other reasons.

In an op-ed for USA Today, Dr. Melinda

CEO of Saint Luke’s Health System in

A lot of surgeons and facilities have

get PPE, some medications and even

Kansas City, Missouri, urged readers not

made it a point to do regular telehealth

equipment. In some cases, they’re even

to delay emergency care.

visits in the interim while they’re waiting

sharing staff. Furloughed staffers at one hospital are finding work through a contract that GHA has with one of its

Hospitals are performing extensive pre-surgical screenings that include asking patients a series of question to determine if they’ve had a fever or been around someone who has tested positive for COVID. Many hospitals require pre-surgery COVID testing within a certain time period before the surgery occurs. “I think the screenings have given patients a little peace of mind as well as the providers and the facility itself,” Adams said.

vendor partners.

“They’re using them in hospitals where they’re short staffed, so we can keep them employed,” Adams said. “I think that communication and that sharing between facilities has been incredibly helpful.”

The supply chain continues to be a challenge.

“From a from a PPE standpoint, I don’t think we ever realized that we were going to need this much PPE,” she said.

“There were hospitals who went into this with PPE supplies that, under normal

to be able to reschedule their elective

circumstances, would last a year, and

do we,” Estes wrote. “We urge you,

procedures to maintain a line of com-

instead they were burning through those

please don’t delay emergency care …

munication so that the patient doesn’t

in one to two months. That extra cushion

for heart attacks, strokes, falls or any

feel forgotten.

on making sure that you have enough

“Emergencies don’t stop, and neither

other urgent need. Right now, a hospi-

supplies is something I don’t think they’ll

tal’s emergency department is among the

are still open and ready, we still want to

forget in the near future and will keep

safest places you can step into anywhere.

get them the help that they need, and

in mind moving forward. Once we have

If you need care, please don’t allow un-

we’re making every effort to do it in a way

bounced back from COVID, I don’t think

warranted fear of COVID-19 to prevent

that’s responsible.”

you’ll see hospitals who keep a low supply

you from getting the medical attention you need and deserve.”

20

“Patients should know that hospitals

Hospitals and providers have come a long way since the beginning of the

of PPE, maybe one or two months, on hand anymore.”

October 2020 | The Journal of Healthcare Contracting

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22

October 2020 | The Journal of Healthcare Contracting

BY GRAHAM GARRISON

The Process of Change The U.S. healthcare supply chain has undergone as tremendous amount of change within a short window of time.

When trying to put 2020 into perspective, Brent Petty shared a quote that he

heightened quickly, the tenured supply

heard through industry discussions. “We went through five years of change in 120

chain people really were the pivot that

days,” said Petty, executive industry consultant for healthcare at Lexmark International,

made the difference.”

Inc. “We’re forever changed, but that’s not necessarily a bad thing.”

Trust and relationships often proved to be the difference between having a successful day or not having a successful

The positive piece of the change is

always said that in an emergency the rules

day. Many supply chain teams, especially

the pandemic has thrust the supply chain

go out the window,” he said. “I preached

in hot spots, measured success by simply

back into the limelight in a way not seen

that for the 19 years when I was on the

figuring out what they needed to do to

since the Affordable Care Act launched.

other side of the desk. When we have a

get through the day. “I talked to one

Prior to the pandemic, when supply chain

backorder or shortage, forget the process,

healthcare supply chain executive in a

did its job well, few headlines were gener-

let’s do what we’ve got to do. But the

hot spot and they were to the point that

ated. But now? The successes and failures

pandemic blew it all out of proportion,

they could predict whether or not they

of supply chain teams and suppliers are

thus not following our processes. And

could get through the next two weeks.

front and center to not just the industry,

because of that, we may have sacrificed

They considered that successful. So I

but the public as well.

quality. But our mission or design in the

think we have to focus a little bit more

healthcare supply chain was never to be a

short-term. But trust, relationships, and

permanent part of emergency services.”

those more tenured leadership experi-

Indeed, supply chain leaders have a lot of new challenges to solve, and they’ll have to do it in front of a captive audience.

The Journal of Healthcare Contracting

The U.S. healthcare supply chain has been put under a microscope in an

ences, I think have become very important during this time.”

asked Petty for his insights into the key

unfair way, Petty said. “We were forced

questions being asked, and perhaps the

to stockpile when we haven’t in the past.

first glimpses at solutions being intro-

We were forced to buy off contract, and

Keeping score

duced into the market, for a supply chain

our everyday life before was to work from

Now more than ever there is a need for a

that will look very different than the one

contracts. So some of the best practices

way to evaluate the reliability of suppli-

stakeholders envisioned at the beginning

got stopped pretty hard.”

ers. But what will that look like? Supplier

of 2020.

Perhaps because of the upheaval, the

assessments or scorecards, metrics, KPI,

value of the more tenured supply chain

as well as transparency upstream into the

leaders was apparent to their organiza-

supply chain are needed.

In the event of an emergency

tions. “The more tenured supply chain

Yes, there have been stumbles from

leader became extremely valuable,” said

compliance, and all those type of met-

supply chain teams, but Petty hopes the

Petty. “The ones with a little bit of gray

rics in the past, which are all good and

industry will learn from those mistakes.

hair around the edges guided their teams

we still need to, but we need to look

One lesson was that standard best prac-

to focus on what was critical. Experience

further upstream,” Petty said. “We’re

tices didn’t apply in an emergency. “I’ve

truly showed here. When this pandemic

just going to have to engage with our

The Journal of Healthcare Contracting | October 2020

“We’ve tracked fill rates, contract

23

THE PROCESS OF CHANGE

supplier partners very differently. I have been in consultant work with some of the largest healthcare manufacturers in the country. Their supply chain is very different than the healthcare supply chain. And they’re going to look into their supply chain going forward.”

What about infrastructure changes?

What about IT changes? Can supply chain teams handle virtual procurement?

“I know technology can handle it, but can healthcare IT? Just the governance around it, for cybersecurity purposes.”

How supply chain leaders examine, di-

“We’re going to have to walk down the value path and tie it a lot closer to several things. I am a big cost, quality, outcomes, and work lives of healthcare clinicians and staff supporter.”

role?” Petty asked. “How do we supply these renewed adventures, or new adventures, in healthcare?”

Mergers and acquisitions of providers are often part of economic swings, but Petty said he would not be surprised to see it happening on the supplier side.

“There are a lot of suppliers that have been financially crushed by this,” he said.

For instance, smaller manufacturers that had 60 days cash on hand suddenly didn’t make any sales for 120 days.

Petty said he is hopeful that COVID-19 has killed the chase for the lowest

– Brent Petty

vert, redeploy, or adjust resources will have

strategic price. He expects healthcare

to change as a result of what’s happened.

systems to be more willing to pay for

“What lessons do we need to learn? How

But amid the pandemic, care has been

U.S. manufactured products, even if they

will we engage differently with our sup-

delivered in new places, such as telehealth,

come at a higher cost.

pliers going forward? It’s got to be more

renewed home health services, and drive

strategic, and be much less transactional.

through sites. “As you look at telehealth,

maybe just highlighted, many key priori-

The chase for the lowest price may have

home health, drive through, where the

ties that haven’t been addressed in the

just ended. I hope it has. If we can retain

care is being delivered differently than it

past,” Petty said. “Hopefully we make the

this memory and learn from it, then we can

was in February, what is supply chain’s

most of this opportunity.”

“This pandemic has really elevated, or

have a lot more future successes.”

Slow recovery Make no mistake, the financial impact of COVID-19 on hospitals, health systems, and the healthcare industry overall has been tremendous. “This is going to be a slow recovery,” Petty said. “And that slow recovery is going to force changes – long-term changes, financial long-term planning, capital planning, etc.”

Spending will have to be reconfigured.

“We’re going to have to walk down the value path and tie it a lot closer to several things. I am a big cost, quality, outcomes, and work lives of healthcare clinicians and staff supporter. We’re going to have to tie things closer to the quadruple aim.”

About Brent Petty Brent Petty is executive industry consultant for healthcare at Lexmark International, Inc. Petty joined Lexmark in 2015 after serving 12 years as System Vice President, Supply Chain for Wellmont Health System, Kingsport Tennessee. In addition to his Lexmark responsibility, Petty had the honor of being the 2015 Chairman of the Board of the Association for Healthcare Resource Materials Management. (AHRMM).

Petty earned his professional designation as a Certified Materials Resource Professional (CMRP) through the AHA Certification Center, a division of the American Hospital Association.

Supply chain has always followed the path to where the care is being delivered.

24

October 2020 | The Journal of Healthcare Contracting

THE PROCESS OF CHANGE

Future of supply chain

The Role of Demand Forecasting in the Resilient Supply Chain The industry must use this moment to invest in automation and digitization of the supply chain to improve efficiency, visibility and response.

The ongoing shortage of personal protective equipment (PPE) and other critical supplies has laid bare the shortcomings of a Just-in-Time (JIT) distribution model for healthcare. For more than a decade, healthcare has increasingly relied on JIT because it advanced the industry’s mission to better control costs and reduce waste. And without question, it contributed to reducing healthcare’s operational costs.

26

BY BRUCE JOHNSON, CEO, Global Healthcare Exchange (GHX)

October 2020 | The Journal of Healthcare Contracting

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NIVERSARY 50th AN1970-2020

50th ANNIVERSARY

THE PROCESS OF CHANGE

But the reality is that JIT proved to be

to meet demand. Manufacturers also had

information about inventory on hand and

no match for a global pandemic. During

trouble assessing true demand in the wake

point of sale consumption with its suppli-

the early stages of the crisis, the exponen-

of allocation. As hospitals were unable

ers. As more retailers followed Walmart’s

tial rise in demand for PPE and ventila-

to get the full amount requested from

lead, manufacturers had the critical mass

tors proved too much for manufacturers

their suppliers, they would place multiple

of data needed to develop more accurate

that faced workforce slowdowns due to

orders for higher quantities from several

forecasts and better manage inventory.

the virus.

vendors in hopes of amassing the total

Retail’s supply chain success is predicated

As we look to build resiliency in

quantity needed. COVID-19 has taught

on sharing data at scale to reduce costs

the healthcare supply chain, we need to

us many lessons – the most essential of

and improve product availability. Health-

finally address a long-standing weakness:

which is that we must continue to invest

care needs to move in this same direction.

demand planning and forecasting. The

in automation, data standardization and

industry must use this moment to invest

system integration so trading partners

with more automated and digitized sup-

in automation and digitization of the sup-

across the healthcare supply chain can

ply chains, including Spectrum Health

ply chain to improve efficiency, visibility

collaborate on demand forecasting and

Systems, Mayo Clinic and Alberta Health

and response.

inventory management. Underlying all of

Services, have been able to better man-

We have already seen that providers

age supply shortages during the pan-

We have already seen that providers with more automated and digitized supply chains, including Spectrum Health Systems, Mayo Clinic and Alberta Health Services, have been able to better manage supply shortages during the pandemic. With this in mind, the industry must continue not only to automate supply change processes to improve the efficiency of transactions, but also work collaboratively to standardize data across all healthcare stakeholders.

demic. With this in mind, the industry must continue not only to automate supply change processes to improve the efficiency of transactions, but also work collaboratively to standardize data across all healthcare stakeholders.

Standardized data is foundational to bi-directional visibility. If providers and suppliers identify products and locations with global standards, e.g., GS1 Global Trade Item Numbers (GTINs) and Global Location Numbers (GLNs), they can share data on existing inventory, utilization and production capacity. Suppliers can then better respond to demand spikes while providers can make contingency plans in the event of shortages.

The intensity and level of collabora-

28

A door opens: Modern demand forecasting

this is the need for trust among trading

tion required to improve supply chain

partners and a belief that demand plan-

visibility cannot be overstated. One of

In 1996, the Efficient Consumer Health-

ning can benefit all involved.

the few bright spots of COVID-19 is

care Response (ECHR) report outlined

The retail and grocery industries il-

how quickly multiple stakeholders came

the need for standardized data and auto-

lustrate these kinds of investments. In the

together to collaborate to solve a com-

mation to support demand planning. Two

retail industry, for instance, Walmart has

mon problem: shortages. This united ef-

decades later, many hospitals still struggle

been a longtime leader. The company’s

fort has been the key to resolving critical

to capture and share data on existing

investment in linking barcode systems

supply issues. As we look ahead, we must

inventory levels and consumption rates, as

with enterprise resources planning

continue to push for even greater levels

well as understand their suppliers’ ability

(ERP) systems enabled Walmart to share

of collaboration.

October 2020 | The Journal of Healthcare Contracting

The future of Just-in-Time Does this mean that JIT is a relic of the past? Certainly not. It’s a proven, efficient distribution strategy that has enabled the healthcare industry to reduce the cost and waste associated with excess inventory.

In the future, we can expect to see more blended models for managing inventory.

We will likely see hospitals amassing more ‘safety stock’ of critical supplies, particularly PPE. Other organizations, such as Froedtert Health, have become their own distributors, managing inventory and logistics as another business line. We also anticipate regional organizations to invest

Healthcare’s success – whether it’s managing shared inventory, navigating a pandemic, or achieving the goals of value-based healthcare – will rely on accurate, up-to-date data. To do this at scale, the industry must finally rally around standards, including their use in transactions. Global standards exist; we simply must use them. While a single organization may lead the way, of course, we must have a trading partner community built at scale using normalized, standardized data to effectively collaborate.

in shared safety stock with each other and/or through their distributors.

Again, healthcare’s success – whether

trading partner community built at scale

but that will only serve to kick the can

it’s managing shared inventory, navigat-

using normalized, standardized data to

down the road. Our industry needs to

ing a pandemic, or achieving the goals of

effectively collaborate.

address its data issues now. COVID-19

value-based healthcare – will rely on ac-

Inventory management and demand

has shown us that the industry has the

curate, up-to-date data. To do this at scale,

forecasting are shared problems in

power to collaborate effectively at un-

the industry must finally rally around stan-

healthcare, and we must address these

precedented levels, but we need accurate,

dards, including their use in transactions.

problems collectively as a community.

up-to-date and standardized data as a

Global standards exist; we simply must

Many in the healthcare industry may

trusted foundation to match supply with

use them. While a single organization may

limit technology investments to mitigate

demand, during both normal times and

lead the way, of course, we must have a

the financial impact of COVID-19,

public health emergencies.

About Bruce Johnson As the president and chief executive officer (CEO) of GHX, Bruce Johnson leads the world’s largest digital trading network for healthcare, which brings together provider, manufacturer, distributor and group purchasing organizations as part of a collaborative and connected community aligned to drive higher levels of supply chain efficiency, resiliency and clinical integration.

A key member of the GHX executive leadership team since the company was founded in March 2000, Johnson has played a critical role in the creation of a global platform that connects the vast majority of hospitals and suppliers in North America and Europe. Under his leadership, GHX has built the industry’s largest, unified data core of transaction, vendor, clinical and supply data, which drives evidence-based decisions about the products used in the delivery of care.

Prior to being named CEO in 2007, Johnson served as the company’s chief operating officer and previously led business development, professional services, sales, marketing and corporate communications. Before joining GHX, Johnson spent 12 years at GE Healthcare in a variety of management roles in sales and marketing.

Johnson is also an active member of the local Denver philanthropic community, serving as the Chairman of A Precious Child’s Board of Trustees and as an active board member for Colorado UpLift and the Broomfield Community Foundation. Johnson has been named a “Corporate Citizen of the Year” by the Denver Business Journal and an Ernst & Young “Entrepreneur Of The Year.”

Johnson earned a bachelor’s degree in Electrical Engineering from the University of Nebraska at Lincoln and his master’s in Business Administration from the Kellogg School of Management at Northwestern University.

The Journal of Healthcare Contracting | October 2020

29

TRENDS

Making the Most of the ERTC The ERTC provisions of the CARES Act provide significant economics for employers who are ineligible or unable to participate in the PPP.

As Congress struggled with trying to help an economy hit by COVID-19, it

a lot of press because the PPP has been

passed a few bills hoping to help businesses and individuals. One of these, the CARES

under intense scrutiny as a result of the

Act, was passed in March and had several provisions intended to help employers keep

forgivable nature of the loans and limited

their employees on payroll.

availability of funds.

The most familiar provision was the Paycheck Protection Program (PPP) – a forgiv-

30

The ERTC, however, is good news

able loan available for small businesses with less than 500 employees. The Employee

for a lot of organizations in healthcare

Retention Tax Credit (ERTC) provisions of the CARES Act provide significant

industry – even the single-hospital and ru-

economics for employers who are ineligible or unable to participate in the PPP. If this

ral health systems – which were too large

is all new information to you, don’t worry – you aren’t alone. The ERTC hasn’t gotten

of an employer to qualify for a PPP loan.

October 2020 | The Journal of Healthcare Contracting

It was enacted to help businesses who

potentially eligible wages for purposes

guidance from a regulatory authority

remained open and paid employees, but

of the ERTC.

like the American Hospital Association

whose revenue decreased drastically due

“What we’ve found in the marketplace,

(AHA) or Centers for Disease Control

to the impact of COVID-19. The impact

is that really large organizations have the

(CDC), and not from a government

came in different ways: through suspen-

financial resources to navigate the ERTC

authority,” Brent says.

sion of elective surgeries and procedures

and relationships with people or organiza-

And while making that choice was

or simply due to the drop in hospital visits

tions that kept them informed about this

the right thing to do, says Maxwell, COO

due to stay-at-home orders. And with

opportunity, allowing them to take advan-

of Clarus Solutions, unfortunately, “the

this drop in revenue, hospitals struggled

tage of it from the start,” says Johnson,

law is clear on that point – the suspen-

and tried to find creative ways to keep

CEO of Clarus Solutions. “We found that

sion of services has to be because of a

employees on payroll while handling the

it’s the hospital in rural America that only

government order.”

uncertainty of the future.

has around 1,000 to 3,000 employees that

This left hospitals with a couple of options:

Any hospital system that has opera-

didn’t even know it was out there for them

tions in a state that was impacted by a

– and they needed our help.”

governor’s order to suspend any part of

1. They could either keep paying their staff to stand around and do nothing, 2. They could furlough people until revenue began to increase, or 3. They could shuffle staff around and take the people who were, for instance, dedicated to the cost center of the department that is the elective surgery or procedure, and redeploy them to screen incoming patients for COVID19.

“ What we’ve found in the marketplace, is that really large organizations have the financial resources to navigate the ERTC and relationships with people or organizations that kept them informed about this opportunity, allowing them to take advantage of it from the start.”

– Brent Johnson, CEO of Clarus Solutions

Choosing to go the third route, as many did, meant taking a nurse who might make $35/hr and having them do a job that, under any other circumstance,

Ensuring eligibility

their operations will likely qualify. This

would have been done for far less. That

To take advantage of the ERTC oppor-

includes organizations that have opera-

cost differential allows for analysis to be

tunity, one of the first thresholds that

tions in two states, and at least one state

done in terms of seeing if a hospital was

has to be crossed is to ensure that the

in which they do business was affected by

providing services, but providing some

organization is an eligible employer. This

a governor’s order.

of those services at a higher cost to the

requires either a 50% decrease in gross

health system than they usually would be

receipts or a suspension of services due

as a result of COVID-19.

to a government order.

According to Brent Johnson and

“We’ve run into two situations where

Of course, even that isn’t as straightforward as it sounds.

One hospital system didn’t qualify for the tax credit because “it was voluntary,

Terracina Maxwell of Clarus Solutions,

we were in contract with a hospital and

they voluntarily restricted services,” says

most hospitals and health systems in the

they ended up not qualifying because

Maxwell. The governor’s order was writ-

country can benefit from the Employee

they made the choice to suspend elective

ten in such a way that it made shutting

Retention Tax Credit no matter which

procedures, not because of a governor’s

down a recommendation and not a direct

options they chose as each creates

order, but because of administrative

and clear order.

The Journal of Healthcare Contracting | October 2020

31

TRENDS

Worth the hassle

$700,000 to $1 million for a 700 to 1,000

of what the organization did when the

The whole situation is complicated and

employee hospital.

pandemic hit.

complex and, well, a huge headache. But

“The ones we’ve worked with so far

Ultimately the wages that qualify

Johnson and Maxwell are convinced that

have all been over a thousand employ-

are those paid to employees who were

it’s worth it to figure out.

ees and most of them have been about

not able to perform their jobs due to

2,500 to 3,000 employees,” says Brent.

COVID-19. “Did you re-deploy people,

kinds of analyses so far and the aver-

“One of which received a credit of

did you furlough people? Tell me your

age tax credits work out to be about

$5.1 million.”

story of what happened when the sus-

“We’ve completed four of these

pension was put in place,” Johnson says.

“It’s not terribly difficult.” The analy-

“It’s not terribly hard. What I’m finding is, that if the CFO is on board, the process moves a lot easier because they’re looking for the dollars to help their organization,” says Maxwell. Typically, Clarus Solutions works with the head of HR and the CFO in order to get all the information they need – which includes payroll information and an understanding of what the organization did when the pandemic hit.

sis is then done on payroll and other statistics, including work RVUs. This information helps give a picture to the government order on both employees and doctors.

As of the time of press time, the program is set to run through the end of the year. Most hospital systems are likely to see their biggest tax credit be for the second quarter of 2020, says Maxwell.

“That’s when they were really restricted – March and then to April and May, there were serious restrictions. So that’s when the tax credit really adds up,” Maxwell says. “You claim it on your 941, so your employment tax filing. It’s actually already past due, but you can go back and amend it to get the money and it’s refundable, so the IRS will cut a check.”

$1,200 per employee,” said Brent. “So

Getting it done

we’re telling people they can likely count

The numbers are nice, but how arduous is

years from the date of filing. Your 941

on $1,000. We had one come in lower

the process for the hospital or health system?

would have been filed in July for second

than that, but the others have all been

“It’s not terribly hard. What I’m find-

“You can amend your 941 for three

quarter and you have up to three years

that or higher.” The difference in credit

ing is, that if the CFO is on board, the

to amend it and claim the credit. Now,

amounts relate to the length of time for

process moves a lot easier because they’re

the reason to file it now, of course, is

the government order and also the deci-

looking for the dollars to help their

you get the cash when you make the

sions made by the hospital system as it

organization,” says Maxwell. Typically,

claim,” Maxwell says. “So for these

relates to employee pay.

Clarus Solutions works with the head of

hospitals that are strapped for cash

HR and the CFO in order to get all the

because of all that happened this year,

napkin math that might paint a better

information they need – which includes

this is a tool given by Congress to help

picture: At $1,000 per employee, that’s

payroll information and an understanding

get cash pretty quickly.”

Here’s some quick, back-of-the-

For more information, contact Brent Johnson at bjohnson@claruscredits.com, or Terracina Maxwell at tmaxwell@claruscredits.com.

32

October 2020 | The Journal of Healthcare Contracting

The race to develop a COVID-19 vaccine has been in the public eye since spring. The race to provide enough needles, syringes and glass vials to administer it has been somewhat lower key. Still, it hasn’t been without nervous moments.

For example, in early May, Rick Bright, former deputy assistant secretary for preparedness and response and director of the Biomedical Advanced Research and Development Authority (BARDA), warned that the nation’s stockpile of needles and syringes was only 2% of the required amount. (In addition to anticipating a two-shot vaccine, Bright’s calculations included about 180 million more syringes for an increase in requests for flu shot, reported USA Today.)

Questions about the vaccine remain.

For example, when will it be available?

How quickly will it be rolled out? Will it be injected, or taken orally or nasally?

Will it be delivered in pre-filled syringes?

Will one injection be enough to achieve immunization, or will two injections be needed? How many Americans will actually get vaccinated?

Feds take action The federal government has taken an active role, contracting for 820 million

Industry Prepared for COVID-19 Vaccine Alarms were raised this spring and summer about potential shortages of vaccine-related products. Despite the uncertainty, industry experts expressed confidence the country would avoid situations such as the PPE shortages experienced earlier in the year.

The Journal of Healthcare Contracting | October 2020

syringes, including 420 million by the end of 2020 and the rest in 2021, reported USA Today.

ʯ In May, BARDA – part of the Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response – awarded contracts for needles and syringes for approximately $110 million to Retractable Technologies (Little Elm, Texas) and Marathon Medical

33

TRENDS

(Aurora, Colorado) for 320 million

manufacturing lines for injection

something that happens in a month,”

needles and syringes, and to Franklin

devices that would provide priority

he added. “It will be the better part of a

Lakes, New Jersey-based Becton

access to the U.S. government for

year to get everyone inoculated, so even

Dickinson for approximately $11

hundreds of millions of syringes

if the new lines don’t come online for 12

million for 50 million units of

and needles to support current

months, there could still be a significant

needles and syringes.

and future pandemic vaccination

need for devices at that time.”

efforts. BARDA agreed to invest

ʯ Also in May, the Department of

an estimated $42 million into a $70

Defense and HHS announced a $138

million capital project to further

Avoiding panic buying

million contract with ApiJect Systems

expand BD’s operations and

Terry Altshuler, portfolio executive

America for U.S.-based manufacturing

manufacturing capacity in Nebraska.

for Vizient Inc., said that needle-and-

capacity that could produce

The new capacity was expected to

syringe suppliers indicate they have a

approximately 100 million pre-filled

be online within 12 months. Later

surplus of product due to the decline

syringes using the company’s “blow-

that month, BD signed an agreement

of non-essential procedures that ac-

fill-seal” technology in 2020, and

with BARDA for 140 million

companied COVID-19. “In addition,

more than 500 million through 2021.

injection devices for the U.S. market.

suppliers are factoring in the possibility of a vaccine being available and

‘ Lead indicators show that providers and supply chain stakeholders are taking the right measures and steps to be prepared.’

making the necessary preparations,” he said. “While they are allocating product to an extent, the intent is to avoid ‘panic buying’ and ensure that facilities throughout the country are able to obtain product.”

Mittal Sutaria, Vizient’s vice president, contracting and program services for pharmacy, said that as of mid-July, Vizient was not aware of any members attempting to stockpile needles and syringes. “Af-

ʯ In mid-July, Smiths Medical

“We’ve been very clear that these

ter the government began placing orders

announced a partnership with

large pandemic orders will not affect

for needles and syringes in May in antici-

BARDA and the Department of

BD’s ability to fulfill existing customer

pation of a vaccine for COVID-19, most

Defense to expand capacity at its

requirements for needles and syringes,

manufacturers and distributors put their

facility in Keene, New Hampshire,

including the annual flu vaccination and

products on protective allocation to pre-

for production of integrated

childhood immunization campaigns,”

vent anticipatory purchasing by providers

hypodermic needle and syringe

BD spokesperson Troy Kirkpatrick said

and to help ensure that available product

products to support COVID-19

in mid-July. “We have capacity to manu-

is distributed as evenly as possible across

vaccination. The federal government

facture hundreds of millions of syringes

all healthcare settings,” he said.

will have priority access to this

between now and January, but if govern-

expanded capacity for vaccination

ments wait too long, there will not be

are still too many unknowns when it

efforts dedicated to COVID-19, flu

enough manufacturing capacity across

comes to considerations for creating a

vaccines, and future pandemics.

the global industry to make billions of

stockpile. The allocation of vaccine will

devices in a month or two.

involve many stakeholders, including

ʯ In July, BD announced a partnership with BARDA to develop new

34

“A vaccination campaign the size and scope of an entire country/world isn’t

“From a vaccine perspective, there

manufacturers, distributors, hospitals, government and public health entities.”

October 2020 | The Journal of Healthcare Contracting

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TRENDS

Right measures and steps Chaun Powell, group vice president of strategic supplier engagement at Premier Inc., said that Premier members anticipate having enough needles and syringes to get through flu season and COVID-19 vaccines. “Lead indicators show that providers and supply chain stakeholders are taking the right measures and steps to be prepared,” he said.

‘ From a vaccine perspective, there are still too many unknowns when it comes to considerations for creating a stockpile.’

“Over the next 18 months, we, as a nation, will have contracted to create

36

more than 870 million syringes above

healthcare) of approximately 25 million

normal production, which exceeds 5

masks annually to over 300 million.

dence that their physician practices

billion syringes for the acute domestic

The twelve-fold increase was unsustain-

will have enough needles and syringes

healthcare industry alone. In addition,

able. With syringes, our baseline is 5

to meet upcoming demand, added

the private sector is also ramping up its

billion consumed annually in the acute

Powell. “In our June survey of acute

production output. Assuming there are no

space. Adding another 800+ million

care members, we asked our members

unforeseen external variables, we antici-

syringes indicates an approximate 20%

how adequate they felt their inventory

pate having enough syringes.”

Premier members express confi-

increase, but it is no comparison to the

of vaccines was in physician offices.

The situation with needles and sy-

twelve-fold impact we saw with masks.”

Eighty-three percent said they had

ringes differs from that faced with N95s

What’s more, the U.S. healthcare supply

an adequate supply, and in fact, a

earlier in the year, he added. “With N95s,

chain has had the time and foresight to

small number (2%) noted they were

we, as a country, went from a national

increase production and inventories of

overstocked due to the decrease in

consumption rate (specific to acute

needles and syringes, he said.

other procedures.”

October 2020 | The Journal of Healthcare Contracting

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HIDA

Stockpiles Divert Critical Supplies from the Front Lines to the Back Shelf Long-term stockpiles present an unworkable mix of management, logistical, and financial challenges for healthcare providers

Proposals requiring healthcare providers to maintain a 90-day stockpile of personal protective equipment (PPE) and other critical supplies appear to be a simple way to avoid future equipment shortages. In reality, requiring every hospital and nursing home to maintain a sizable stockpile in the middle of global pandemic will exacerbate ongoing PPE shortages. Stockpiles of this size divert supplies from the front lines to the back shelf of a warehouse.

HIDA and fellow trade association AdvaMed wrote to New York’s Health Department and Governor’s Office to share concerns about the state’s 90-day mandate. Together, we urged the state to utilize the private sector’s innovation and

90-Day 90-DayPPE PPEStockpile StockpileMandates Mandates Increase Shortages And Increase Shortages AndDrive DriveUp UpCosts Costs Policymakers are considering mandates for healthcare providers to maintain 90-day stockpiles of critical

Policymakers are considering mandates for healthcare providers to maintain stockpiles of critical supplies such as personal protective equipment (PPE). These mandates are likely90-day to increase supply suppliesand such as personal equipment These are likely to controlled increase supply shortages drive up costsprotective to hospitals.

A better (PPE). solution is tomandates stockpile government shortages and drive costs to500+ hospitals.

A better solution is to stockpile controlled pandemic supplies at theup country’s existing distributor warehouses acrossgovernment the U.S., positioning pandemic at the country’s existing distributor warehouses across the U.S., positioning inventory closesupplies to healthcare providers500+ for immediate surge needs during a crisis. inventory close to healthcare providers for immediate surge needs during a crisis.

Large Stockpiles Create New Logistical Challenges Large Stockpiles Create New Logistical Challenges A 90-day supply for a 350-bed hospital requires 5,700 sq. ft. of A 90-day supply for a 350-bed hospital requires 5,700 sq. ft. of space — the equivalent of space — the equivalent of

13–15 tractor trailers.

13–15 tractor trailers.

experience with manufacturing, storage,

A 90-day supply for a 5,000-bed A 90-day supply for sq. a 5,000-bed system requires 81,400 ft. of system 81,400 space — therequires equivalent of sq. ft. of space — the equivalent of

1½ football 1½ football

warehousing and technology to help ensure New York’s public health goals.

“Leveraging experienced supply chain experts will avoid the risk of product expiration, theft, damage, and waste,” we wrote in the letter. “Further, we are concerned that hospitals in New York will not be able to meet the logistical challenge of this stockpil-

of supplies to meet the first-call needs of healthcare providers when a crisis strikes. Based at the 500 commercial distribution centers across the country or government warehouse, the federal government would manage and control the stockpiles. Distributors would manage them to ensure the inventory is rotated

Supplies Needed On The Front Lines Supplies Needed On The Front Lines Get Moved To The Back Shelf...

Get Moved To The Back Shelf...

July 8, 2020 July 8, 2020

Grave Shortages of Protective Grave Protective Gear FlareShortages Again as of Covid Gear Flare Again as Covid Cases Surge Cases Surge

…And Drive Up Costs …And Drive Up Costs A 90-day supply of PPE 90-day supply of PPE for aA350-bed hospital for cost a 350-bed hospital would as much as would cost as much as

$2 million. $2 million.

May 6, 2020 May 6, 2020

and replenished.

In addition to reserves, the pandemic response infrastructure would include expanded, diversified surge manufacturing capacity with a strong focus on domestic

“…demand continues to outstrip supply because “…demand to outstrip supply because hospitals, statescontinues and the federal government are hospitals, statessupplies.” and the federal government are trying to stockpile trying to stockpile supplies.”

production and centralized federal stock-

Stockpiles need to be managed and the increased inventory rotated be managed and the increased inventory rotated toStockpiles avoid the need risk oftoproduct expiration, theft, damage, and waste. to avoid the risk of product expiration, theft, damage, and waste. © Health Industry Distributors Association © Health Industry Distributors Association

ing requirement. A 90-day supply for a

piles to meet the emergency needs of state and local governments. Relying on forward-deployed reserves would relieve

350-bed hospital requires 5,700 square

elective surgeries that can generate up to

providers of the expense and adminis-

feet of space, which is the equivalent of

50% of a hospital’s operating revenue.

trative burdens of maintaining massive

approximately 15 tractor trailers.”

A better approach is to leverage the

stockpiles of their own and enable hospi-

proven expertise of health industry distrib-

tals to keep doing what they do best: care

reserves are one reason why demand

utors. Distributors have the infrastructure

for patients.

continues to outstrip supply. Imposing

ready to provide storage, logistics support

a 90-day stockpile mandate on every hos-

and the expertise to manage the range

originally introduced in the Medical Sup-

pital would create even greater shortages.

of costs, operational, and logistics issues.

plies for Pandemics Act of 2020 that

Stockpiling incurs additional costs and

All this can be done while building a new

would implement this framework. It would

complications happening when hospitals

national pandemic response infrastructure

authorize funds to implement a supply

are reeling from the impact of the pan-

capable of replenishing supplies.

chain flexibility manufacturing program

Efforts to create larger equipment

demic. Many are suffering a steep decline in revenue due to canceled or postponed

38

BY LINDA ROUSE O’NEILL, HIDA VP of Government Affairs

One component of that infrastructure would be forward-deployed reserves

Lawmakers are considering language

creating incentives for U.S. manufacturers to improve supply chain elasticity.

October 2020 | The Journal of Healthcare Contracting

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BY KHATEREH CALLEJA, JD, PRESIDENT AND CEO OF THE HEALTHCARE SUPPLY CHAIN ASSOCIATION

Healthcare Group Purchasing Organizations:

Helping to drive COVID-19 response and recovery The coronavirus pandemic has impacted every aspect of the American

of defense in surge situations by helping

healthcare system, placing unprecedented pressure on hospitals, nursing homes, physi-

to vet new manufacturers for compli-

cians, and the healthcare supply chain. Physicians and other healthcare providers are fac-

ance with standards set by the FDA and

ing a number of challenges, from trying to find ways to effectively treat patients while

National Institute for Occupational Safety

conserving critical supplies, to coordinating with public health authorities, to constantly

and Health (NIOSH). GPOs have also

updating treatment plans in light of new COVID-19 data. As the sourcing and purchas-

been advocating for legislative solutions

ing partners to America’s acute and non-acute healthcare providers, healthcare group

like the Safeguarding Therapeutics Act,

purchasing organizations (GPOs) play a critical role in emergency response efforts and

which enhances the FDA’s authority to

have been working around the clock alongside healthcare providers to help address and

destroy counterfeit drugs and medical

prevent the spread of COVID-19 and safeguard patient care.

devices at American ports of entry, preventing such products from entering the supply chain to help support .

GPOs have provided critical support and guidance to hospitals and healthcare

record of providing critical support dur-

systems throughout the pandemic, assem-

ing emergencies like Hurricane Harvey,

bling dedicated communications teams,

the California wildfires and the Ebola

providing training to clinical teams, and

outbreak, GPOs understand firsthand just

creating a dedicated war room of staff

how critical public-private coordination

working continually to provide timely up-

and collaboration is for ensuring a compre-

dates on the latest public health protocols,

hensive response. That’s why GPOs have

product supplies, and more. GPOs have

been working closely with the Department

also helped hospitals and health systems

of Health and Human Services (HHS),

institute preventative measures in facilities

new manufacturers to contracts to rapidly

U.S. Food and Drug Administration

and nursing homes, including regular

increase supplies, and working with non-

(FDA), Drug Enforcement Administration

temperature screenings, closing dining

traditional and adjacent industries to fill

(DEA), Assistant Secretary for Prepared-

and common areas, establishing regu-

supply gaps for essential products such as

ness and Response (ASPR), FEMA, and

lar checkpoints and mask distributions,

hand sanitizer, isolation gowns, and surgi-

healthcare stakeholders to provide data on

and other integral measures in our fight

cal caps. When a hospital’s standard dis-

surge capacity, streamline communication,

against this pandemic.

tribution channels were unable to supply

and identify and mitigate potential short-

N95 masks, the hospital’s GPO worked to

ages related to the coronavirus.

To help ensure healthcare providers have access to personal protective equip-

secure a substantial supply of N95 masks

ment (PPE) and other critical medical

from a U.S. industrial chain retailer.

supplies, GPOs have pursued a number

40

As an industry with a proven track

GPOs’ fierce commitment to qual-

As America’s healthcare providers continue to work to treat and prevent the spread of the coronavirus, GPOs will be

of actions such as supply coordination ef-

ity has also helped to protect member

alongside them to provide critical support

forts to help medical teams obtain prod-

hospitals from purchasing counterfeit or

and enable continued patient access to

ucts and support surge capacity, adding

inferior goods, serving as a significant line

high quality, affordable healthcare.

October 2020 | The Journal of Healthcare Contracting

35% Thicker

*

NEWS

Conductiv Introduces Diversity Initiative Conductiv™, a third-party spend optimization solutions provider, announced

Conductiv will anchor this initiative by

an initiative to help healthcare providers better identify and increase their spend with

adding diversity analytics to its integrated

local and minority-owned suppliers.

third-party services optimization suite – allowing for immediate visibility of Tier 1 and Tier 2 local and minority-owned

As local, minority-owned suppliers

businesses – but it can often be difficult to

supplier spending and new suppliers.

have struggled with the economic impact

identify diverse suppliers with capabilities

Customers will have the ability to precisely

of COVID-19, and the public advocates

needed within the healthcare industry,”

measure their diverse supplier spending

for businesses that promote greater equal-

said Conductiv CEO Chris Gormley. “Rec-

and efficiently evaluate and activate new

ity, Conductiv’s latest enhancement offers

ognizing both the importance and need for

contracts with carefully vetted local, minor-

diverse suppliers an effective and proven

national change in this moment, we imme-

ity-owned suppliers from one platform.

way to grow their businesses, while

diately deployed a team of developers to

enabling providers to encourage and

create technology enhancements that en-

gional GPO contracts with vetted diverse

promote diversity with their third-party

able Conductiv’s members to increase their

suppliers and illuminate diverse supplier

service providers, according to a release.

Conductiv will also add local and re-

percentage of spend with diverse and local

GPO contracting opportunities based on

“Healthcare providers are looking to

suppliers. Studies have shown that popula-

a healthcare organization's historic spend.

support a more diverse and inclusive roster

tion health and economic performance are

For minority-owned suppliers, working

of suppliers – including community-led

correlated and hold influence over social

with Conductiv Contracts provides an

minority-, women- and veteran-owned

and environmental outcomes.”

opportunity to grow their businesses with regional and national healthcare providers.

A member advisory committee will guide these collective efforts and investments.

“Recognizing both the importance and need for national change in this moment, we immediately deployed a team of developers to create technology enhancements that enable Conductiv’s members to increase their percentage of spend with diverse and local suppliers.”

– Conductiv CEO Chris Gormley

“We’re committed to helping healthcare supply chains increase their diversity and inclusion efforts by connecting them to high-quality minorityowned suppliers,” Gormley added. “Our members have indicated their challenges in differentiating diverse spend and finding qualified diverse suppliers. To solve these challenges, our team is building off Conductiv’s category-defining integrated purchased services optimization suite and strengthening our data sources to ensure this is a simple and advantageous feature for both healthcare providers and diverse suppliers.”

42

October 2020 | The Journal of Healthcare Contracting

The only publication dedicated solely to the healthcare supply chain.

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CARDINAL HEALTH

A Bird’s Eye View Making sense of this year’s supply chain disruptions, fluctuations, and changes

As a distributor, Cardinal Health has been uniquely positioned to get a bird’s

items compared to what Cardinal was

eye view of the extreme fluctuations in demand for various products used for COVID

seeing pre-pandemic.”

testing throughout the pandemic.

Currently, he said the company was

“It’s definitely been an interesting journey and a lot of it falls really right on…how

still seeing a many-fold increase for those

our healthcare system was approaching the populations,” says Dan Romain, vice presi-

products as compared to before the

dent global sourcing for Cardinal Health.

pandemic. He noted that the increased demand had been “sustained but that it was starting to settle down a little.”

“Early on, there was a very singular

As demand for various products

transport media in order to be able to test

surged beyond what was globally avail-

were not yet any COVID-19 tests available.

as many patients as possible.

able and what could be produced, sup-

“So you saw this huge rush – almost

Massive increases in demand for lab

ply backlogs started. By July, Romain

like a second flu season – as we were try-

and testing supplies occurred early on,

said that the backlogs for specimen

ing to provide some answers to patients.”

Romain says. He noted that in March

collection supplies seemed to be dimin-

there was “something in the order of a

ishing, but were still 3 to 4 times that

seven-fold increase in demand for those

of anything pre-pandemic.

At the same time, there was an unprecedented spike in demand on

44

collection products like swabs and viral

focus on testing,” says Romain, but there

October 2020 | The Journal of Healthcare Contracting

“It’s created a really interesting period of time in terms of managing that supply chain,” Romain says.

Talk about an understatement.

also by preparing for what the next issue will be.

For Cardinal Health, this has meant expanding and reimagining its

“It’s trying to gather as much information as possible and starting to plan around that,” Romain says.

supplier relationships.

“We’re participating differently than we have in the past and partnering differently,” Romain says.

Rolling shortages

Romain says these are some of the key

Because everything within the supply

questions that need to be asked as we

with its existing supplier partners in order

chain is so connected, any shortage will

navigate through these uncertain times:

to get a clearer and real-time understand-

cause a ripple effect on other products and categories. No shortage is ever iso-

ʯ How can we make sure that we’re set up for the best success?

lated, but such severe and wide-ranging

ʯ What can we do to make sure that

shortages brought on by the pandemic

we’ve got supply chain continuity?

have set off a cascade of rolling shortages across the market.

“From a diagnostic testing perspective … the collection products – products

The company has been hard at work

ing of their capacity and what each supplier is capable of producing.

Whether it’s helping with logistics or with sourcing items, the new

ʯ Do we have all the right relationships? ʯ Are we appropriately stockpiling the

objective is to make sure that Cardinal

right amounts of products for that?

its manufacturers are able to produce

ʯ How do we think differently

Health does what it can to ensure that as much as possible and be as efficient

needed to obtain the samples – have

about some of these categories

seen extreme pressures, not just here

where there were traditionally

but globally,” says Romain. “PPE is an-

only very few suppliers, or on

company is turning to companies that are

other area where [Cardinal Health] has

product categories that were not

“making collection materials that serve

seen extreme pressures on the system

geographically diverse?

other markets or geographies” and then

as possible.

On top of that, Romain says the

as folks need those products to keep individuals safe and to try to slow the spread of COVID.” “Even within that, you can take it a level down,” says Romain. “As you get into the details there are those mini-shifts.

PPE is a great example where it felt like even within that first it was masks, now it’s isolation gowns and exam gloves.”

He notes that the reasons for the shortages are twofold, with some of it being driven by the way the products were

“ Through the course of this journey, we’ve been able to work with some really great partners to bring totally new products to market.”

– Dan Romain, vice president global sourcing for Cardinal Health

utilized globally and some of it being driven by shortages or backlogs in getting and processing raw materials.

Drastic times

working to make those materials available

Drastic times call for drastic measures.

within the U.S. market.

The future

The circumstances of this pandemic have

“It’s such a dynamic environment that’s

demanded that supply chain find new and

to identify who those partners are out

constantly changing,” Romain says, not-

innovative methods in order to continue

there and that we [Cardinal Health] can

ing the importance of focusing not only

to support escalating and evolving needs

make sure that we add them to the supply

on overcoming any current problems but

within the healthcare system.

chain,” Romain says.

The Journal of Healthcare Contracting | October 2020

“We’ve all been working really hard

45

SPONSORED

CARDINAL HEALTH

“Then, of course, our hospitals were just

national market for product sources, the

How lab testing has changed over the course of the pandemic

company has turned to product sources

The pandemic has affected every aspect

from being medical/surgical hospitals to

beyond just those in the healthcare industry.

of the healthcare industry in unforesee-

really being a full hospital of ICU and

able ways. While the entire supply chain

medical beds.”

In addition to looking to the inter-

“Through the course of this journey,

absolutely full and they switched over

we’ve been able to work with some really

has been challenged, labs and testing were

great partners to bring totally new prod-

not only heavily impacted but were also

to be getting the infection under control,

ucts to market,” says Romain. He cited

placed in the national spotlight.

Waugh said that the thinking was starting

one successful example of a partnership

It will come as no surprise that

By mid-June, as the country seemed

to “shift back to the opposite of where

they formed with a company that was

Henry Ford Health System’s strategies

we were before, and that we really should

making a product for the dental market

for testing has evolved over the course

assume that the vast majority of people

that was able to be modified and turned

of the year, according to John Waugh,

are negative.”

into a specimen collection swab.

system vice president pathology and

“Now we’ve got this in our bag to say, ‘Hey, we can meet the increased demand

laboratory medicine.

However, Waugh acknowledged that the health system was preparing to deal

“Initially, as we were riding up the

with a potential “second wave.”

as our available pool of suppliers just

curve of this, the conventional think-

expanded’” says Romain. “Those are the

ing was that we needed to assume that

riod right now,” said Waugh, “because we

kinds of things that we’re doing to make

almost all of the patients that we were

see some states lighting back up again and

sure that we’re prepared and have access

seeing were positive and that we need

that will bring the prevalence higher in the

to more products moving forward.”

to be extremely careful,” Waugh says.

U.S. population.”

“We’re in a little bit of a difficult pe-

Respiratory season looms large The United States will still be wrestling with the pandemic as we start into the “regular” respiratory season this year.

Charting a path through is top of mind for labs everywhere, and Henry Ford Health is no exception.

Waugh says that Henry Ford Health will continue to watch the supplier market very closely in the months to come.

“Obviously, there’s a good likelihood that we could have a second surge that comes towards us and typically seasonal influenza hits at about December 1,” says Waugh.

Historically, influenza testing is done via point-of-care testing where acute patients present for care so that it’s typically tested in-office so providers can make informed treatment decisions during the visit.

“I think the dilemma coming at us is going to be likely worldwide allocation of products that have got multiple capabilities,” Waugh says.

“In this case, if we see influenza season overlapping with another resurgence of coronavirus here we’ll be right back

46

where we were in March, where we were testing influenza A/B to rule out flu and then going after COVID-19 as a second option if patients were symptomatic but not presenting with a positive flu test results.”

Additionally, he says they will be taking a harder look at a “number of suppliers that are working on multi-target molecular diagnostics, in particular, those able to pick up the SARSCOV-2 target as well as Influenza A/B and even RSV… Those are attractive products that will be, again, in worldwide demand and likely on allocation, which will present its own set of challenges.”

October 2020 | The Journal of Healthcare Contracting

CALENDAR

Due to COVID-19 restrictions at press time some dates and locations may change.

Calendar of events Federation of American Hospitals

Premier

2021 FAH Conference

Breakthroughs Conference

and Business Exposition

June 15-18, 2021

March 7-9, 2021

Washington, DC

Washington Hilton Hotel Washington, DC

Share Moving Media Health Connect Partners Hospital Supply Chain Fall Virtual Conference September 28 - October 22, 2020

Consolidated Service Center Forum November 3, 2020 Virtual Event • Register at: www.jhconline.com/events

Virtual Event National Accounts Summit Spring 21 Hospital Supply Chain Conference

November 4-5, 2020

May 3-5, 2021

Virtual Event • Register at: www.jhconline.com/events

Baltimore, MD

IDN Summit Spring IDN Summit & Reverse Expo April 12-14, 2021 Omni Orlando Resort at ChampionsGate Orlando, FL

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SEND ALL UPCOMING EVENTS TO GRAHAM GARRISON, EDITOR: GGARRISON@SHAREMOVINGMEDIA.COM

The Journal of Healthcare Contracting | October 2020

47

OBSERVATION DECK

Making Sense of the Changes At the beginning of September, FedEx Corp. announced plans to hire about 70,000 seasonal workers to handle what it was anticipating to be an unprecedented level of holiday deliveries. According to a Bloomberg report:

The courier has already added thousands of workers to keep up with a jump in deliveries as consumers order more online because of coronavirus concerns. FedEx’s U.S. ground deliveries rose 20% in the quarter through May from a year earlier. The company will probably match or exceed that for its fiscal first quarter, which ended in August.

48

Online commerce has exploded, while the rate of decline with traditional retail chains has accelerated. Some businesses are shuttering while others are finding it difficult to keep up with a huge spike in demand.

By Graham Garrison

Stories like that are becoming commonplace across industries and marketplaces in America. Online commerce has exploded, while the rate of decline with traditional retail chains has accelerated. Some businesses are shuttering while others are finding it difficult to keep up with a huge spike in demand. Indeed, the U.S. healthcare system may be at the epicenter of it. I think of the quote Brent Petty said he heard during industry discussions: “We went through five years of change in 120 days.”

The positive piece of the change is the pandemic has thrust the supply chain back into the limelight in a way not seen since the Affordable Care Act launched, he said. Prior to the pandemic, when supply chain did its job well, few headlines were generated. But now? The successes and failures of supply chain teams and suppliers are front and center to not just the industry, but the public as well.

In this issue we cover some of those spotlight issues, such as the effect of delayed medical care for the public, the anticipated arrival of a vaccine, and the long-term projections of supply chain models like Just-in-Time.

We may not have all the answers yet, but based off of our conversations with supply chain leaders, we’re beginning to have the right questions being asked.

October 2020 | The Journal of Healthcare Contracting

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